R&D tax inquiry re-emerges, hearing next week

Denham Sadler
National Affairs Editor

A public hearing into the federal government’s controversial changes to the research and development tax incentive is set to be held next week, after the inquiry was delayed by several months.

The Senate Economics Legislation Committee is currently inquiring into legislation which amounts to a $1.8 billion cut to the research and development tax incentive (RDTI) and had originally been set to report by the end of April.

This was pushed back to early August due to the ongoing COVID-19 pandemic, and it had previously been understood that this reporting date may be pushed back again to the end of the year.

It now appears the August date will remain, with the committee now planning to hold a public hearing on the changes to the scheme on Monday.

Parliament House
Blue skies: The Senate R&D tax inquiry has emerged from lockdown, with a new hearing scheduled

A number of major industry groups will be appearing at the inquiry, along with the relevant government departments and agencies.

Slated to appear at the hearing on Monday are Research Australia, Medicines Australia, Manufacturing Australia, Universities Australia, the Business Council of Australia, Science and Technology Australia, the Australian Information Industry Association, the Department of Industry, the Australian Taxation Office and Treasury.

The industry groups are likely to be critical of the planned changes, with most of the groups already providing submissions to the committee that raised concerns about the impact of the cuts and the prospect of companies moving offshore as a result.

The government departments and agencies will be questioned by Labor senators on the operation of the scheme and the impact of the changes, particularly in light of the coronavirus crisis and the recession.

Labor senator and former shadow innovation minister Kim Carr is understood to be making a guest appearance at the hearing and will question the industry groups and government departments.

Senator Carr has campaigned against the RDTI cuts since they were first announced, and recently wrote that they would “make it impossible for the incentive to function as intended by stimulating investment in R&D”.

The committee has received nearly 100 submissions, with virtually every one of them critical of the legislation.

InnovationAus understands the government is now looking to get the changes confirmed and approved by Parliament before the federal budget, which is now set to be handed down in October.

The changes were first flagged by the Coalition in the 2018 budget but were knocked back by the same Senate economics committee. They were reintroduced to Parliament late last year with some minor tweaks, and quickly referred back to the committee.

The reforms include an increase of the RDTI expenditure threshold to $150 million, a $4 million cap for smaller companies and the introduction of an intensity measure to calculate the tax offset for larger firms.

Currently, the legislation states the changes will apply to the 2019-20 financial year, but it’s now likely they will be pushed to the 2020-21 financial year rather than being applied retrospectively.

Labor has previously raised a series of concerns with the legislation in Parliament, but is yet to reveal what amendments will be moved or if the legislation will be supported in the Senate.

Opposition Leader Anthony Albanese offered his most critical comments on the changes on Wednesday, saying they would hamper Australia’s economic recovery from the pandemic.

“The Morrison government plans to cut the research and development tax incentive which is designed to encourage innovation and growth. Unless we invest in R&D we will only be able to read the story of our proud manufacturing history, when we should be writing the next chapter,” Mr Albanese said at the National Press Club on Wednesday.

“The Reserve Bank Governor says we need to be building bridges across to our recovery. But with these cuts, the government is burning them.”

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